Good morning and welcome to day three of the 31st Annual J.P. Morgan Healthcare Conference. My name is Geoff Meacham. I am the senior biotechnology analyst here at J.P. Morgan. It’s a pleasure to introduce NPS Pharmaceuticals; one of the emerging leaders in the orphan drug space and speaking on behalf of NPS is CEO Francois Nader. Francois?

Francois Nader

Thank you, Geoff and good morning. Indeed very exciting times for NPS. The company has been in existence for 26 years and we finally made it to the finish line with our first product. It took us a while. We are thrilled to be here. This is our mission and we can safely say that we really achieved the first milestone of this long journey that is our mission, because on December 21st we were gratified with the approval of our first product Gattex for a condition called short bowel syndrome and it was indeed an application of our mission which is to pioneer and deliver therapies that transform lives of patients where diseases worldwide and worldwide is applicable as well, because Gattex was approved as Revestive in Europe back in the summer.

With that, I'll remind you of the language of the Safe Harbor statement; very important statement to keep in mind. But switching to NPS and who we are, as I mentioned Gattex was our first US approval in 26 years; however, and there's a huge however, Gattex is blessed with a very balanced and rich portfolio. We have this unique situation where we have a number of products in developments; the leaders being Gattex and Natpara. But over the years we have licensed out a number of products and with that we benefit from a very strong stream of royalties that will come and are coming our way.

The biggest product for us in terms of royalty is Sensipar; Sensipar is a product that is marketed by Amgen; very successful I should say. The annualized revenues are over $900 million. We get a 10% royalty which is about $90 million a year. Amgen gave us an advance that we are reimbursing at $32 million a year which also means that we keep the rest, we keep the balance which is a very nice inflow directed to our bottomline of about $60 million a year and that's very, very important for the company.

So as you see from this chart, not only we have Gattex, Natpara, not only we have marketed products for which we get royalties, but also we have two products NPSP790 and 795 that we are developing for a very rare condition called ADHH and you will hear us talk about ADHH in more detail over the year. And at the same time while we are very happy with the approval of Gattex in the adult population and I’ll spend a little bit of time talking about this, you should not forget that short bowel syndrome in kids is an extremely, extremely life threatening condition and our objective is to develop Gattex in pediatrics starting this year and going forward.

I was debating what to present today in terms of Gattex; we have so much to talk about and landed on really four tracks that I think would characterize the achievements we made with Gattex, but also the importance of this unmet medical need. And the four tracks I will follow to characterize the value that Gattex brings is to start talking about the high unmet medical need of the condition. It’s not unusual actually for rare conditions not to be known as to the extent of the unmet medical need that they could generate, but importantly enough and especially for the parenteral support condition associated with short bowel syndrome, the burden of illness is something that I would like to spend a bit of time talking about, along with the clinical value that Gattex brings to the patients and conclude with the ultra orphan status of Gattex.

Let’s start with the high unmet medical need. For those of you who are not familiar with the condition, short bowel syndrome is a condition of a condition which makes it a little bit more complicated in the sense that technically short bowel syndrome results from a significant resection of the small bowel of patients. But the resection is due to a primary condition; usually it's either Crohn’s or vascular diseases, bariatric surgery is emerging as an important etiology and fortunately cancer is another one. And with this resection, the remaining gut is really enabled to absorb enough nutrients and fluid for patients to survive. So they have to rely on artificial nutrition that is given to them through an IV line, called parenteral support. Unfortunately, these patients are now hazard to a line anywhere between 10 to 12 hours every single day for the rest of their lives and meanwhile they have to run to the restroom about 15, 20 times every day and parenteral, and as you can imagine, this raises very significant social and personal constraints to say the least.

So the other issue with parenteral nutrition is it is a life saver. However, it does not address the key point, the key etiology of this condition which is the inability of the remaining gut to absorb the nutrients and fluids and this is where Gattex gets in, because Gattex really improves the absorption of the gut and doing so reduces the reliance on parental support and for some patients as we will see it in a minute they could be completely wind off.

Doing our math bottom-up, we identified about 3,000 to 5,000 addressable patients in the US that are adult short bowel syndrome parental support dependent patients in the US which is the label were granted which puts us really square in the ultra orphan space. Interestingly enough, despite the fact that short bowel syndrome is a very small condition, fortunately as you can see it from a chart here on a scale of one to seven, short bowel syndrome ranked second with 1.5 out of seven; when we asked the physicians and the payers very importantly, the payers as well, as to the perceived level of unmet medical need may be you cannot read it from the back, but the first one on the list is cystic fibrosis with 5.7. So we are just in the same I would say zip code as cystic fibrosis and you have the rest of the orphan condition that goes on between CAPS, PNH, Pompe, Gaucher and HAE. So it is very important for us to recognize that it is certainly an unmet medical need from a patient’s perspective it is as well a recognized unmet medical need from the payers and from the physicians.

Now let’s talk about the burden of illness. This is a summary of a publication by the NIH that looked at 80 families and actually calculated very extensively the cost associated with the complex homecare associated with parental support and the numbers are staggering. When you look at the total cost, it goes up to anywhere between $185,000 a year up to close to $600,000 a year, and this is extremely important from a healthcare cost in general. When we talk about short bowel syndrome people tend to link short bowel syndrome cost and burden of illness to parental support. So the cost of parental nutrition, the cost of parental nutrition is significant, however its only one element of this very important and very expensive condition especially when you start adding the home healthcare services and the support related to the hospitalization. So quite a pricey condition for the system and for society.

These costs as high as they are do not include the indirect costs associated with this ability, and really the dollar value, the quantification that we could associate with the improvement of the daily living of these patients. So with that in mind, we developed Gattex over the last many years and we are really gratified as I said that the product was approved by FDA on December 21, and let me give you a thumbnail of what Gattex offers to these patients. First of all it is the first and only analogue of GLP-2 that is proven to increase absorption of the remaining bowel and therefore decrease and eliminate the need for parental nutrition. This is extremely important because it addresses the root cause if you will of the syndrome which is the inability to absorb. We reverse that and that's extremely important.

In our study we showed that 63% of our patients responded and the threshold was about 20% or more reduction of parental nutrition compared to only 30% for placebo. Interestingly enough when we gave Gattex over a long period of time as we did in STEPS 2 which is still an ongoing study. STEPS 2 is a two-year study, so its long term, its very gratifying to see that 72% of the patients responded given the threshold of 20%.

With that in mind, we were granted an approval and the label is adult. Adult short bowel syndrome patients that are dependent on parental nutrition. This is a very important label because it gives the physician the flexibility to determine when they judge that the patient is dependent on parental nutrition, and the second important thing is that the FDA recognized that short bowel syndrome is a chronic condition, Gattex is a chronic treatment. So the treatment of Gattex could go for as long as the physician decides to be.

Now importantly enough this reduction of parental nutrition was associated or quantified if you will by days off. As I said on average patients are on parental nutrition six to seven days a week, 10 to 12 hours every day. So that's anywhere between 60 to 70 hours a week, alright. With Gattex they were able to reduce their reliance by one day for about 50% of the patients and by three days or more for about 25% of the patients.

Let me translate this in plain English. In plain English it means that these patients now can be free from parental nutrition anywhere between 50 days to 150 days per year, okay. So they can socialize, they can travel, they can live a normal life. Interestingly enough, many of these patients achieved independence from parenteral nutrition. So let me characterize what this means, one of the patients has been on parental nutrition for 18 years. So this patient for the last 18 years was hooked on a line, 10 hours a day, six days a week, and this patient being on Gattex for less than a year, actually, was able to kick it out and live a normal life and we have a number of these patients.

As you can see from the last bullet point, the side effects of Gattex are very much mirror, with the pharmacological property of Gattex which we all know. But also the specifics of the short bowel syndrome as a condition, and our label recommends that we have RAMS and the RAMS is a very practical educational tool that we will communicate to the physicians, to the caretakers and to the patients. It's very important to have RAMS so that the patients, the physicians, and their caretaker know how to use the product.

At the same time, we and the FDA agreed that we need to follow these patients long-term, and we have a registry in place for (inaudible) registry that will enable the patients to enroll and therefore for us and the agency to follow these patients over a period of 10 years.

Finally the framework for Gattex is it serves an ultra orphan conditions. So we have fortunately for the patients a very small number of addressable patients, and despite the high cost per patient, given the low number it has a minimal budget impact if you will on the payers given the number of payers out there. We're very gratified also by the fact that society, we are willing to treat and pay for these neglected disorders and encourage companies like NPS to invest over the long run and provide the patients with treatments that they really need.

Very exciting times for NPS because we are ready to do it, we are ready to launch the product, and we have been preparing to launch the product for the last couple of years and these are our strategic objectives now. The first is to make sure that we have the right team to launch the product, and I can tell you that I am very proud, very, very proud with our commercial team we are able to attract top notch professionals with very significant commercial experience.

If I look at our commercial leadership team, between them they have launched and they have been associated with nine orphan products. And launching an orphan product is very specific for those of us who are coming from big pharma and migrated to small companies and often it’s a completely different ball game, and we were very gratified by hiring people who know what they are doing.

We have a small commercial sales organization about 30 people total, 24 sales reps, three area business director, and three key account directors that will cover 75 key accounts that really in turn cover about 80% of our target lives. We have also a medical affairs deployment with 8 [MA cells] probably the best and the highest the best in quality and quantity publications to any launch. We have a number of publication that support the launch of Gattex. The important criteria for a successful launch in the orphan business is to identify those patients. We have very limited number of patients and finding them has been a challenge and is usually a challenge. Here also I think we are ready because we have identified over 1,000 patients; very specifically identified them out of a total population of 3,000 to 5,000, what we guided the other day is the fact that we will deliver Gattex to anywhere between 200 to 300 patients before the end of this year.

NPS Advantage very key, one other learning from the orphan space is the importance, the critical importance of a patient centric strategy. The patient is in the middle of any successful strategy regarding orphan products. So we have created within NPS what we call NPS Advantage. NPS Advantage is manned by care coordinators and the care coordinators will offer or are already offering actually, the phone has started to ring are offering personalized services to the patient.

As we've seen, these patients are sick. They are debilitated, they are tired and the last thing they want to have to worry about is file the insurance companies. Yet we want every patient to have a successful experience on Gattex and therefore as soon as the prescription is written, we offer the patients and the prescriber to sign a waiver, a written form and enrolment form and from there on our care coordinator actually assists the patients and the prescriber throughout the reimbursement process. They also support them through the acquisition of the product and support them in terms of how to use Gattex appropriately.

In terms of distribution, we came to the conclusion that there is a very important touch point that is already in place for the short bowel syndrome; patients who are PN dependent and it is simply the companies that deliver the parental nutrition and those are the home infusion companies. So we contracted with the top five home infusion companies in the US and they deliver a number of services for us. First of all, they distribute the product for us through a very restricted network of their specialty pharmacy embedded in their organization, but also they provide the patients with the clinical services that are Gattex related. Why? Because they already have the touch point; their nurses visit the parental nutrition, so the parental nutrition dependent patients and therefore it is so important to add to this if you will all the clinical elements that are required for the good use of Gattex.

These are the five companies that we contracted with and they are the top five names in this business and basically it’s a win-win situation. They help us identify new patients. They help us understand the prescriber base and they help us expand our knowledge of the insurance and reimbursement pathway because they are already, if you will, aligned with the pairs. At the same time, Gattex offers them a new offering. They get their fees on the distribution and the dispensing and frankly it’s a very competitive market. These five top national companies own about one-third of the total market, so with adding Gattex to their offering they can expand their market share and grow their business.

Last but certainly not least, we have, its very important to keep in mind that the payers play a key role in this business. One thing that was extremely important for us and this is point number five is not to take the payers for granted. And over last two years we have, we talked to a number of payers and made sure that they understand Gattex and made sure that we understand their constraints. And bottomline, we will offer these payers the value proposition, a very comprehensive value proposition for them to reimburse Gattex.

The good news for the patients is all the insurance companies and all the players that we talk to actually said that they would reimburse Gattex. Now knowing that, we also know that they would put (inaudible) those in place to make sure that only the eligible patients would get Gattex, which is something that we strongly support. But at the same time they want to make sure as they do usually that reauthorizations are in place, and the usual hurdles that are associated with the orphan drug business. And this is why again NPS Advantage is so important because NPS Advantage, our care coordinator will play the go between role, between the patient and the players and support the reimbursement of Gattex.

One element that is important also in the orphan business and we are very mindful of is the notion of co-payer co-insurance. And therefore we have established a very comprehensive patient’s assistance program and depending if the patients are commercial, public, they go in different tracks if you will, to secure the co-pay and the co-insurance. Our objectives, stated objectives is given the small target population of 3,000 to 5,000, we do not want any patient eligible for Gattex not to get it because of financial constraints. So we have put in place not only this if you will process with the payers, but we have this comprehensive process in place also in terms of patient’s assistance program.

Now some patients unfortunately fall through the cracks and they don’t have the ability to be either or, and for those patients, we will establish and we have established a feel good program. Securing reimbursement takes time. We predict that at least for the very first patient it might take between three to four month for the first patient to go through the first process with one pair if you will, this time will shrink over time if you will and when we have more patients that will secure reimbursement.

So net-net Gattex is we are very bullish about the potential of Gattex in the US. Originally we said that it is a $350 million peak sales; we know now that it might be much higher than that because of the addressable population, because of the price we priced the product at $295,000 but when you count in the adherence and compliance, we are confident that we will exceed the $350 million.

We spent quite a bit of time today on Gattex because it’s the news of the day, but I would like to take few minutes to talk about Natpara our second lead product. Very, very important product for the company and for the patient. It addresses another orphan condition called hypoparathyroidism that is characterized by the absence if you will or not enough parathyroid hormone in the body. Usually it is due to a rejection of the parathyroid glands or rejection of or major if you will surgery of the neck.

About 60,000 to 80,000 patients in the US suffer from this condition and the implication is hypocalcaemia which in turn if you will affect the neurological system, the muscular system and the bone system as we all know. So calcium is a very important component of the good functioning of all of the above. We were able to put together and develop a replica over the native parathyroid hormone and come up with Natpara which is a one to 1 to 84, so 84 amino acid replica of the native parathyroid hormone.

We completed our Phase 3 program very successfully. We are quite pleased with the result of our Phase 3 program, and now we are in the process of preparing to filing the VLA. Our objective is to file the VLA by mid-year; however we have a couple of things that we need to take care of before filing the VLA. The first is to complete a usability study patient’s usability study, and Natpara is delivered by a pen and we had to redo usability study and we have to do it to and make sure that the FDA agrees with the outcome of the study.

At the same time, we have faced a manufacturing issue with this product which was very unfortunate, because this product has been manufactured without any glitch. 140 lots over the last four or five years. Unfortunately we hit a glitch and we are actively working on solving this manufacturing issue, unfortunately also both the usability study and the manufacturing issue could be gating our ability to file by mid-year.

With that in mind, if I look at 2013 very exciting year for us. We are again very excited with the opportunity to launch Gattex in the US. As I said we are filing Natpara by mid-2013 assuming that we solve these two issues that I mentioned. But also I will be more than happy to update you throughout the year on our progress related to the Calcilytics and the pediatric program for teduglutide.

With that I really thank you for your attention and wish you a great day.

Question-and-Answer Session

[No Q&A Session for this event]

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.